Wednesday, January 17, 2018

Civil procedure. Sanctions. SCOVT reverses sanction against mortgagee for repeatedly filing foreclosure actions and failing to prosecute them to completion.

Provident Funding Associates, LP v. Campney, 2017 VT 120  [filed 12/22/2017]

REIBER, C.J. Senior mortgagee appeals the trial court’s order dismissing junior mortgagee as a defendant from senior mortgagee’s fourth foreclosure action against mortgagors. The trial court determined that junior mortgagee was entitled to dismissal as an equitable remedy because senior mortgagee had imposed unnecessary costs on junior mortgagee by repeatedly filing foreclosure actions against defendants and failing to prosecute them to completion. The court’s order had the effect of reordering the priority of mortgages, making senior mortgagee’s interest second in priority to that of junior mortgagee. We reverse and remand for the court to consider monetary sanctions, such as attorney’s fees, as an alternative sanction.

The central question posed by this appeal is whether the court appropriately invoked equitable authority to dismiss junior mortgagee as a defendant as a penalty for senior mortgagee’s conduct in the prior foreclosure actions. The power to impose dismissal as a sanction must be exercised sparingly. This is because “the law favors disposition of cases on their merits.”. Furthermore, “sanctions against litigants should be proportionate to their offenses.” For this reason, we have held that “[t]he use of a dismissal sanction is proper only if the court finds that the defendant would be prejudiced by anything less than dismissal.”

We conclude that the litigation approach employed by senior mortgagee warranted sanction, but the court’s dismissal of senior mortgagee’s claim against junior mortgagee was erroneous. The court should have considered imposing monetary or other less drastic sanctions before proceeding to the extreme sanction of dismissal.

Because mortgagors did not cross-appeal, we do not reach their argument raised in their brief that the trial court should revise its judgment decree for foreclosure and recompute any sums due.. See See Huddleston v. Univ. of Vt., 168 Vt. 249, 255, 719 A.2d 415, 419 (1998) (“An appellee seeking to challenge aspects of a trial court’s decision must file a timely cross-appeal …”).

The trial court was within its discretion in deciding to impose some form of sanction. However, the trial court’s dismissal of senior mortgagee’s action against junior mortgagee was an unsustainable exercise of its inherent authority to discipline litigants and attorneys for their conduct. We therefore reverse the trial court’s order dismissing junior mortgagee as a defendant and remand the action for the trial court to consider monetary sanctions against senior mortgagee

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